#154: Want to retire early? You'll need at least $5 million, more likely $10 million, says famous financial personality Suze Orman. I should know. She said that to me, directly, on my podcast. I asked Suze for her opinion about a frugal, flexible person who wants to retire early with a $2 million portfolio. She warned that retiring would be a massive mistake. "Two million dollars is nothing," Suze said. "It's nothing. It's pennies in today's world, to tell you the truth." Wait, what? "Listen," she said. "If you have $20 [million], $40 [million], $50 [million] or $100 million dollars, be like me, okay. If you have that kind of money ... and you want to retire, fine." "But if you only have a few hundred thousand dollars, or a million, or $2 million, I'm here to tell you ... if a catastrophe happens ... what are you going to do? You are going to burn up alive." But what's wrong with retiring early on $2 million? Assuming it's invested 50/50 in equities and bonds and harvested at a 4 percent withdrawal rate, a portfolio of $2 million could create annual investment income of $80,000. Surely that's enough, right? *Riiiight?* Nope. Suze says that's not enough. "I think that in the long run, $80,000, especially after taxes and as you get older, is not going to be enough. You may think it's going to be enough, but it's just not," she told me on the Afford Anything podcast. "You can do it if you want to. I personally think it is the biggest mistake, financially speaking, you will ever, ever make in your lifetime." I asked her if a $3 million portfolio at a more conservative 3 percent withdrawal rate would be okay for an early retirement. She said no. "Think about it logically," she said. Supporting a disabled family member who needs full-time care could cost $250,000 per year, she said. Ordinary cost-of-living would cost another $100,000 per year. This means you'll need $350,000 per year after taxes to cover your costs, which is $500,000 per year before taxes, which at a 5 percent withdrawal rate means that you'd need a portfolio of $10 million. If you don't have at least $5 million or $10 million, don't retire early, Suze said. "Here's what the FIRE people, you are not thinking about, so I'm going to give it to you straight here now," she said. She described the possibility of getting sideswiped by massive taxes and catastrophic emergencies. What if your home gets destroyed by an earthquake or flood and insurance denies your claim? What if you're in a tragic car accident and you need full-time care? What if the U.S. experiences 25 percent unemployment, which means you won't be able to find another job if you wanted one? What if your investment income gets consumed by massive future tax hikes? "When you get older things happen," Suze said. "You're hit by a car, you fall down on the ice, you get sick, you get cancer. Things happen." "Alright, you can do it if you want to," she said. "I'm just telling you, you will get burned if you play with fire." For more, visit the show notes at http://affordanything.com/episode154 Learn more about your ad choices. Visit podcastchoices.com/adchoices

#152: Dr. Brian Portnoy is an expert in making decisions. He holds a Ph.D. from the University of Chicago, he's a Chartered Financial Analyst, and he's the Director of Investment Education at Virtus Investment Partners. Dr. Portnoy joins me on the podcast to discuss how to make smarter decisions -- not only about investments, but also generally in life. How do we sharpen our decision-making skills? How do we improve our critical thinking processes? Here are some of the takeaways from our conversation. 1. Beware of resulting. Great results can come from poorly-planned decisions. And wise decisions can lead to good results on occasion. Don't judge a decision based on its results; judge a decision based on the soundness of the thinking process through which you made that choice. 2. Manage your expectations. Your happiness with an outcome will depend on the gap between your expectations and reality. If you can't control reality (at least, not completely), then manage your expectations. It's the happiness variable that's most under your authority. 3. Don't make hasty evaluations. When you go to a restaurant, you order a (vegan?) cheeseburger, and based on the taste of that burger, you can immediately evaluate your decision. You can't do that with investments. When you make an investment decision, there's a huge time-gap between when you make the choice and when you see the results of that choice. This time-gap may last for decades. And this means that your decisions are tough to evaluate. Don't judge an investment decision on one-year or two-year results, as tempting as that may be. Judge your decisions based on the soundness of the thinking, not the short-term ramifications. 4. Automate. It's the best way to save you from yourself. 5. Define risk. Some people think that "risk" is synonymous with volatility. Others think that "risk" refers to the loss of capital. Know what "risk" means to you. Personally, I define it as probability x magnitude. Today's guest, Brian, points out that magnitude can happen in a multitude of dimensions and verticals. 6. Diversification, risk management, and behavior. When in doubt, pay attention to these three factors. In order to better manage your investing choices, manage these qualities. You cannot control broad market outcomes, but you can control your exposure, risk, and choices. 7. You're the average of the 5 people you spend the most time with. Surround yourself with frugal, ambitious, reasonable, wise, intelligent, kind, adventurous people -- and you will become stronger in those qualities. You are in charge of the community with whom you surround yourself. Even if you can't change your physical neighborhood, you can form an online or digital community of people who support your goals and reflect your philosophy. 8. Keep a decision-making journal. What gets measured, gets improved. If you want to improve your decision-making skills, keep a journal of the way in which you make decisions, e.g. your thinking process. Then in the future, when you have the benefit of hindsight, you can look back on your decision-making process. Remember, don't judge your choices based on outcome; judge your choices based on the soundness of the decision-making process itself. Dr. Portnoy dives into detail about how to make better decisions in today's episode. Enjoy!   For more, visit the website at https://affordanything.com/episode152 Learn more about your ad choices. Visit podcastchoices.com/adchoices